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In the early 1920s, Ludwig von Mises pointed out that “socialism is the watchword of our day. The socialist idea dominates the modem spirit. The masses approve of it; it has set its seal upon our time. When history comes to tell our story it will write above the chapter, ‘The Epoch of Socialism.”‘

Since the Soviet experience in Russia was only beginning, Mises could still say in 1922, “As yet, it is true, Socialism has not created a society which can be said to represent its ideal. But for more than a generation the policies of civilized nations have been directed towards nothing less than a gradual realization of Socialism.”

During the last seventy years, the socialists had their chance to institute their ideal in many countries around the world. And in every case the result has been disastrous. Socialism in practice has produced tyranny, mass murder, poverty, corruption and cultural destruction. The rejection of socialism by the people of Eastern Europe and the former Soviet Union must be considered the ultimate indictment of the ideology that declared itself to be the liberator of mankind.

The socialist ideal contained three ideas at its core: economic central planning; the belief in collective or group rights; and the case for nationalized social services. The application of these three ideas in socialist countries resulted in economic chaos, social conflict and ethnic warfare, and the collapse of all basic services considered essential and desirable for normal and healthy life.

Yet here in America, at the very time that the end of socialism is heralded as the vindication of the American way of life — a way of life grounded in individual liberty, economic freedom and voluntary association — the American government, with the support of a sizable portion of the populace, continues down the road to socialism. The American people seem oblivious to the lessons to be learned from the socialist experience in other lands. And the ideas leading us further along our road to socialism are the same ones that lead other peoples to the dead-end of state control, economic stagnation, group conflict and societal decay.

1. The Planned Economy. Under the headings of industrial policy, high-tech subsidization, infrastructure modernization and worker retraining for “high-wage” jobs, the American government hag assigned itself the task of planning and directing the economic destiny of over 250 million people. If fully implemented, these policies will succeed in making practically all economic decision-making subservient to the central planners and social engineers in Washington. The methods applied will not be as crude or as brutal as the system of direct commands used in the old Soviet Union, but its end result will be no less comprehensive.

What gets produced, who produces it, where it gets produced, and what technologies and labor skills are used will no longer be determined solely by businessmen and entrepreneurs guided by the need to maximize profits by satisfying consumer demand. No, the private businessman, the entrepreneur, the investor will now have a governmental “partner.” Through various financial subsidies and tax incentives, this partner will induce and stimulate those in the private sector to expand their investment and production activities in the directions that the government has decided are economically and socially desirable. The state will decide, even more than already, what kinds of communication and transportation networks America “needs.” Presuming to know what skills and talents the American people should acquire to earn a good living in the future, the benevolent bureaucrats of Washington will create incentives for Americans to invest in certain types of technical and professional expertise.

And what is most disturbing, large numbers of Americans are waiting with great enthusiasm for this renewed era of activist government. Some in the private sector are waiting with great enthusiasm because they see higher profit margins, improved investment opportunities and subsidized job training through an expanded governmental largess. But far worse is the enthusiasm of those who believe that government should direct the private actions of the citizenry and who believe that government has the wisdom to do so. And far more dangerous is that these policies are propounded while their proponents assure the American people that they actually are advocating a market economy and rejecting the notion of governmental planning.

2. Collective or Group Rights. In the name of a false social and economic equality, the American government has embarked on a road that leads to a caste society, in which individuals will increasingly be categorized and judged on the basis of their social background, their gender and ethnic origin, and sexual orientation. Are you eligible for a particular job? Should you be admitted into an institution of higher learning, as either professor or student? Will you have the opportunity to compete for a contract in the marketplace? Should you receive a certain proportion of the business in a particular sector of the economy? Have you hired the right people — and the right number of different types of people — in your enterprise? Have you committed a hate-crime by uttering some words or articulating some ideas that are considered offensive to some ethnic, social or sexual group? These and other questions like them are what affirmative-action programs, multiculturism, and political correctness are all about.

The long struggle for human liberty, in which rights are conceived only in terms of individuals, is threatened with reversal in America. The individual will increasingly find himself submerged within the confines of how others classify him for political purposes. People will find, just as in the old Soviet Union, that their opportunities in life will be determined and controlled by the class, gender, race or sexual groups to which they happen to belong. The path to economic improvement will be transferred from the arena of peaceful competition and voluntary exchange in the marketplace to the halls of political power in the state capitals and in Washington, D.C. It will be in the halls of political power that collective groups will fight their wars for economic and social privileges at the expense of others, with individuals finding they have no identity or destiny other than in terms of how their group has fared in this struggle for governmental influence, redistribution of wealth, and control.

3. Nationalization of Social Services. The extent to which the socialist idea has triumphed in the 20th century is seen most clearly in the very notion that there are certain goods and services that should be viewed as “social.” The provision of medical care, housing accommodations, legal services, retirement plans and the like are no different than the provision of any of the other things people want and desire, and for which they pay a price in the market. It would be just as easy to argue that shoes, clothing, food, entertainment, reading material and marital partners are “socially necessary” commodities that every human being needs — and, therefore, that the state should be assigned the task of providing them. It is indicative of the extent to which the socialist idea has penetrated the American psyche that practically no one along the political spectrum in America is willing or courageous enough to question directly and uncompromisingly the idea that the state should provide any such “social services” and to make the positive case that the supplying of such “services” should be completely left up the private sector.

In his 1920 book, The Return to Laissez Faire, the English classical liberal Sir Ernest Benn argued that “a citizenship which is actuated by Individualism will wash its hands of that ‘citizenship by proxy’ which is variously called social reform, Socialism and Communism. All these shibboleths mean paying somebody else with other people’s money to do your own duty — a very different thing.”

By every individual doing his own duty, Benn meant that a free citizen in a free country takes on the responsibility to plan and care for his own life. He associates with his fellow free men on the basis of mutual, voluntary agreement and never expects others to bare the consequences or the costs of his own actions through use of the power of the state.

But, alas, Americans have lost the knowledge and the desire for this type of free citizenship. As in 1922, when Ludwig von Mises penned his monumental work, Socialism, “The socialist idea dominates the modern spirit … it expresses the thoughts and the feelings of all.” Its domination is, indeed, so complete that Americans now increasingly crave what they say they oppose. And, as a result, they will likely get even more of what they say they do not want.

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Dr. Richard M. Ebeling is the recently appointed BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel. He was formerly professor of Economics at Northwood University, president of The Foundation for Economic Education (2003–2008), was the Ludwig von Mises Professor of Economics at Hillsdale College (1988–2003) in Hillsdale, Michigan, and served as vice president of academic affairs for The Future of Freedom Foundation (1989–2003).

Reading List

Prepared by Richard M. Ebeling

Austrian economics is a distinctive approach to the discipline of economics that analyzes market forces without ever losing sight of the logic of individual human action. Two of the major Austrian economists in the 20th century have been Friedrich A. Hayek, who won the Nobel Prize in Economics, and Ludwig von Mises. Posted below is an Austrian Economics reading list prepared by Richard M. Ebeling, economics professor at Northwood University in Midland and former president of the Foundation for Economic Education and vice president of academic affairs at FFF.